For many of us, January 1st is the day we think seriously about making changes to our lives, including our finances. According to surveys from December 2022, 53–66% of respondents reported they were going to make finance-related resolutions. However, it’s easy to make resolutions, it’s much harder to keep them, especially without regular check-ins. Not to mention, it can be extra difficult to make a realistic plan for your money right after the holidays, the time when our finances are arguably the least representative of the rest of the year.
However, Spring is a great time to revisit your finances. You’ve had a few months of hopefully more normal expenses, you still have most of the year to make progress towards your goals, and, with Tax Season, you already have your financial information somewhat at the ready.
Side story: I once went on a date with a guy who was in his late 20s and hadn’t realized until that year you had to file taxes! And his parents were both accountants!!! I was shocked, and even more shocked that he laughed about it on a first date right after he told me he’d run a marathon with 0 training. If you know me but at all, you’ll know I was not impressed.
Okay, back on topic! So Spring is a great time to think about your financial plan and any goals you have set for yourself or would like to set for yourself. To get started with Spring Cleaning, there are a few tasks to consider undertaking:
- Assess your emergency fund. Do you have 3-6 months of living expenses saved for an emergency? An emergency could include a layoff, car repairs, medical bills, or even withstanding a stock market decline if you are nearing retirement and don’t want to withdraw (or withdraw as much) of your retirement portfolio during a down market. If you don’t have 3-6 months saved, your first goal should be contributing to an emergency fund, so you don’t end up paying extra for an emergency by relying on credit cards.
- Revisit and/or dream up your financial goals and timeline them out. This could be a detailed timeline or just bucketing your goals into short-term (less than 5 years), medium-term (5-10 years), and long-term (10+ years).
- Joe Saul-Sehy, former financial advisor and host of my favorite finance podcast Stacking Benjamins, recommends this strategy and I love it for a couple of reasons. First, it helps you get excited about your goals. It’s easier and more fun to save if you know what you’re saving for and when you’ll get that thing. Second, timelining your goals helps you determine where to save your money depending on when and how much money you need. See my post on saving for the short-, medium-, and long-term for more information.
- Evaluate (or create) your budget and determine if changes are needed. The bulleted sub-steps below are for those who have already created and been following (or trying to follow) a budget. If you have not created a budget yet, see my post on how to develop a budget that saves you money and makes you happy.
- Ask yourself if you are saving enough to meet the goals you outlined above. If you are not, evaluate whether you can cut back on expenses to meet those goals.
- Assess whether your spending habits are making you happy and aligning with your values. If not, are there easy changes that would bring your budget in line with your values? For example, if you feel deprived because you’re limiting your spending too much or guilty because you’re spending a lot on things you don’t need, you might create a guilt-free spending envelope within your bank account and automatically allocate a certain amount to that bucket each month. Each month, you have that amount to spend on non-necessities you love and not feel guilty about it. This is a strategy Ramit Sethi recommends in his book I Will Teach You To Be Rich. Alternatively, if you’re spending money on things that don’t bring you joy, you might consider whether you can cut those expenses and redirect them to something you do love.
- Third, look for leaky areas in your budget: subscriptions that you don’t use, insurance bills that you could lower by changing providers, excess groceries that go to waste, and make a plan to eliminate or limit those leaky areas.
- Make a savings plan. After you understand your savings goals and budget, you’ll want to check whether you are putting your money in the best places to meet your goals. A high yield savings account (HYSA) is a great option for short-term goals, while investing in an index fund is a good option for long-term goals. See my post on saving for the short-, medium-, and long-term for more info on where to save your moneys based on your goals.
- Automate your spending and saving. You might do this comprehensively, by setting up envelopes in your bank account for things like savings goals, bills, guilt-free spending, etc. and sending a consistent percentage of your paycheck each month to these envelopes (most banks support an envelope system). You then draw from these envelopes to pay for each category. The benefit of this system is that it gives a very clear picture of what you can spend each month on different categories so that you don’t overspend or feel guilty about spending money you’ve allocated for fun things. If this system isn’t your thing, you might just automate payments on your bills and minimum payments on your credits cards so you’re never caught in a “whoopsie” situation.
- Check your credit score and consider taking steps to improve it if needed. Credit scores impact the amount you pay for insurance, mortgages, loans, and more. Improving your credit score can lead to lower bills in the future. Some easy steps to improve your credit score are:
- Request a higher credit limit (but don’t actually use that extra credit!) Credit utilization is the percentage of your credit limit that you’re using, the lower percentage you’re using the higher your credit score will be, so a higher credit limit can be a quick boost to your score.
- Become an authorized user on a long-standing account with a history of on-time payments (like one of your parents’ accounts). You don’t even have to have a credit card or use the account at all. This is just a simple way of increasing the average length of your credit history and decreasing your credit utilization.
- Automate minimum payments on credit cards so that you don’t get any dings on your credit score for late payments.
- Pay down debt if possible since the larger your ratio between debt and income, the lower your credit score will be.
- Assess whether your income is high enough to meet your goals. If it’s not, can you ask for a raise? Start a side hustle or occasional side gig like pet sitting? Or even change jobs? If pursuing these options isn’t right or not available to you, can you modify your financial goals to better align with your financial situation? These are hard questions, but best to evaluate them every once in awhile so you can put yourself in a position to do the things you want to do and feel empowered rather than bummed out.
Following these steps takes time. However, it can be exciting to dream about your goals and make a plan to get there. Ideally, you’ll repeat these steps quarterly, with each step taking less time as you get a clearer hold of your goals and finances.
Remember, however, that I am not a financial advisor, so before making any financial changes, consult with a professional.
Are there additional checks you like to do for your finances? Let me know in the comments! And if you enjoyed this post and/or think it might be helpful for others, I’d love for your to like, subscribe, or share with someone you think might benefit from it.